It depends on the level of response from the Israeli govt and to whom. They already started to attack the Southern Lebanon border in addition to the Gaza strip. If this escalates into West Bank region (which is quite possible) then not great. Also, as the Hamas were sponsored by Iran then the response might be towards them (then there will be a massive problem).
As a side note, look at the videos of the houses under 'missile attack' in the Gaza footage whereby buildings were being toppled. It is interesting that firstly someone just happened to be at the location taking video of the event. Secondly, look at how the buildings came down. These looked like controlled demolitions. Always view everything will open and questioning eyes.
From a financial standpoint, oil has behaved as expected with a $3 increase immediately this morning. Remember that Saudi Arabia just brokered a deal between Israel and Iran and signed a few weeks / month ago. It will depend on how the Israeli's respond especially towards Iran. This might cause instability in the SA country too, and that might end up worse than this initial conflict (look into how the Iranians have been pushing for the overthrowing of the Kingdom of SA due to Mecca control). If Israel attacks Iran in response, then SA might need to reduce supply further. More impact on inflation being pushed again.
Gold has also behaved in an expected manner. This has gone up around $15 an ounce this morning. Whether it continues back up will depend on if we end up having a devaluation of all assets from this additional event.
What I find amusing is that the non-precious metals segment of the Materials sector has risen early this morning. I am not sure if there is going to be a 'benefit' in this area or whether this is based upon the final moves on the US markets before this had been evaluated. I cannot see this keeping those companies up and therefore might be a shorting opportunity in those that have risen this morning. Copper is already showing down on the markets and that usually signals a decline in demand.
Financials and other parts of the market are pretty well steady at present. It will depend on how long this lasts and the effect on the sectors as this continues. Flights are going to be impacted immediately and this has responded accordingly already.
Looking to the US markets, these are showing negative and an escalation is likely to be further down at this stage. The spike in bonds a few days before this event might have been those in the know having a pre-warning of this happening... spooky.
Overall this is unlikely to be positive for the immediate future but time will tell.
(20min delay)